The reality of how supply chains are evolving in the face of friction between the West and China is often hard to substantiate. However, the development of industrial and logistics property in South- East Asia is a key part of the new direction supply chains are taking, both within Asia and at a global level.
For example, in an interview in Nikkei Asia last month, the Chairman of the Thai property company Amata, Vikrom Kromadit, commented that the development of Amata’s new industrial park in Laos was driven by the need of both Western but particularly Chinese companies, to deal with political uncertainty, stating “with the U.S. presidential election looming and uncertainties surrounding China’s economic trajectory, we expect more Chinese companies to seek overseas expansion as a lifeline”.
Amata has just built what it calls an “industrial city” at Natuey in northern Laos. The development appears a fairly conventional one, composed of assembly facilities and warehouses, however in addition to the usual attractions of cheap labour and low-cost energy the facilities at Natuey also have the additional attraction of being just 10km from the Chinese border.
In addition, Natuey is next to the China-Laos railway that has been developed by the Chinese Railway Ministry and gives access to the wider Chinese railway system. This rail system in-turn has been joined to wider passenger and freight rail network that now stretches into Thailand. Road-freight networks across the region have existed for sometime. Although Laos is landlocked, it can access Vietnamese ports through the Mekong and presumably would benefit from the canal that the Cambodians are building linking the Mekong to the sea. The clear purpose is the construct a logistics infrastructure that link Laos not just to China but also to the rest of South East Asia and indeed to global markets.
Companies such as Amata have been important is developing not just Thailand but other economies in the region, notably Vietnam. Their industrial parks are a key element in the emergence of such economies as major producers of consumer durables such as furniture and footwear which in-turn represent a large segment of the market for container-shipping. The continued development of this infrastructure across South-East Asia is a strong indicator of the source of container and other trades in the near future.
Source: Ti Insight
Author: Thomas Cullen
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